Muras Matters: Capital Gains Tax and the Autumn Budget

Capital Gains Tax and

The Autumn Budget

Background

With the Autumn Budget due on Wednesday 22 November 2017, many political and tax commentators have started to try to predict what changes the Chancellor, Philip Hammond, may introduce. Given the cancelling of his planned rise in national insurance contributions for the self employed after the last Budget in March, there is the need for the Chancellor to address the shortfall in tax revenue that would have been raised from that increase.

One area some tax commentators have expressed an opinion on are potential changes to Capital Gains Tax. Firstly, there has been talk of a tightening up of the Entrepreneur’s Relief conditions, but perhaps more significantly and potentially more difficult to deal with at this stage, some commentators have suggested there could be an increase in capital gains tax rates.

Detail

Currently gains on a capital asset (excluding residential property) are subject to Capital Gains Tax at 20% for higher rate tax payers, and 10% for basic rate tax payers where the gain does not exceed the individual’s unused basic rate band. For gains relating to residential property, the tax rates increase to 28% and 18% respectively.

Some commentators have expressed an opinion that the chancellor could be looking to reverse his predecessor’s cuts to capital gains tax and increase capital gains tax rates. There has also been the suggestion that the Chancellor could make such an increase effective from the date of his statement on 22 November, given that his predecessor George Osborne did introduce a precedent of having a change to capital gains tax effective from the date of his statement. So it could be that if Philip Hammond follows this, we wake up on the 23 November with higher capital gains tax rates.

If you are currently considering selling an asset or looking to raise some cash from such a sale in the near future and such a disposal is likely to result in a gain in excess of your annual allowance of £11,300, then it may be beneficial to bring forward such a disposal to on or before 22 November, and crystallise any gain at 20%. If the capital gains tax rates subsequently do increase this would represent a tax saving and in the event should no change to the capital gains tax rates occur, you will be no worse off in terms of taxation.

Of course it is pure speculation by various commentators as to what the chancellor may do, but it could prove prudent to plan ahead if you are in the process of considering any such disposals

In terms of changes to Entrepreneur’s Relief conditions, talk has surrounded possible changes so that an asset backed business (for example pubs, hotels) may no longer qualify in quite the same way for Entrepreneur’s Relief.

If you would like further information or advice on any of the above, please contact our Tax Director, Jenny Marks.

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